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Industry White PaperOmni-Channel Vision, Crosschannel Reality: Meetingthe Consumer Where TheyWant to Buy

Omni-Channel Vision, Cross-channel Reality: Meeting the Consumer Where They Want to BuyKey TakeawaysThe station’s schedule flashes: ICHON TRAIN ARRIVING. Cross-channel brand interaction has become a must-havecapability for retailers, not just a luxury Cross-channel is primarily about enabling consumer interactionand participation in the shopping experience—supportingtechnology is secondary Cross-channel shopping is good for stores Retailers have already begun building their own cross-channelfutures Retailers will take unique technological paths as cross-channelreality eventually meets their omni-channel visionThe application prompts him, Pay Now or Pay At Pick-Up.Young-Jae starts walking toward the train doors, takes a seat,and clicks, Pay At Pick-Up.As the train doors close, Young-Jae’s mobile phone buzzes. It’s atext message with links to pick up instructions and a QR code he’lluse to identify himself at the store after work when he picks up hisorder in-store.Now imagine you were on the same platform. You watchedYoung-Jae order with his mobile phone via a retailer-specificapplication by scanning items on the digital window. Theretailer’s order management system handled the fulfillment of histransaction, and when he picks up in-store, he will pay at a typicalpoint-of-sale terminal. Ask yourself, “What channel is this?”What channel is this?Imagine—Young-Jae, a South Korean professional, stands on theplatform of a subway station. As Young-Jae glances back and forthbetween the station schedule and his mobile phone, a large‘flat-screen’ catches his eye. It looks like a digital version of hisneighborhood grocery store: milk, juice, bread, soda even theshelf height is correct.What is cross-channel?Cross-channel shopping occurs whenever a consumer moves fromone channel to another during the course of a single shoppingexperience. Common examples include order online and pick-upin-store (click-and-pick); order in-store for home delivery; orscanning items on a mobile device then paying at the point-of-saleregister.The station’s schedule flashes: ICHON TRAIN - 2 MINUTES.Young-Jae opens an ‘app’ on his mobile phone, logs on, andchecks his shopping list. He starts scanning items on the screen.Milk, times two; bread; soda diet.As shopping—and the supporting technology—has evolved, so hasthe language used to describe it.Young-Jae clicks Finish and Pay, selects In-Store Pick-Up, andconfirms his desired store. Because he’s used his loyalty PIN, theapp knows the store where he shops.1 Language1 Consumer Behavior1 Retailer Enablement2 Multi-channel2 Consumers shop across different channels which functionindependently of one another2 In-store, e-commerce, call-center channels function intechnological and operational silos1 Cross-channel3 Same consumers shop across channels and perceive thesechannels as part of the same brand3 In-store, e-commerce, call-center, and mobile channels areconnected through integration of varying sophistication andreliability1 Omni-channel4 Consumer does not perceive channels at all, simply a brand4 All channels served by common set of technology services,single set of data, and visibility beyond the individual retailer2

Industry White PaperConsumers in controlMost retailers face a cross-channel reality and have omni-channelaspirations. Some retailers may choose to move straight to anomni-channel end-state while others will evolve through a seriesof cross-channel initiatives. The rate at which these aspirationsbecome reality will be driven by technological path-dependenceand by business value delivered from new cross-channel shoppingbehaviors.Research consistently shows that consumers worldwide embracetechnology during the shopping process. Globally, this willingnessto use technology has grown over the last few years.2 Roughly three quarters of consumers are willing to usetechnology during the shopping process, including web, mobile,kiosk, television, and social media. More than four out of ten (42 percent) of consumers globally areto use two or more devices. These “instrumented” consumershave grown steadily as a percentage of the population, with nocorrelation to gender or income. One-in-four consumers is “hyper-instrumented”—willing to usethree or more devices—with emerging market consumersoutpacing major market consumers more than three to one.What’s at stake?Young-Jae’s shopping scenario may seem extreme, but itdemonstrates the shift in how retailers and consumers interactacross channels—a shift from emphasizing how retailers sell tohow consumers buy. Consumer participation—not just reaction—has become the norm for brand interaction.As e-commerce emerged, retailers often approached multichannel shopping as an upside feature. Customers who shoppedboth in-store and online were measurably more valuable thaneither store-only or web-only consumers. Retailers could generateincremental value by inducing consumers to expand their brandinteraction to multiple channels.1This use of technology to shop has moved beyond the point ofpurchase to the entire experience from awareness and research, topurchase, taking possession, and obtaining service and support.A shopping journey prompted by an email received at homecould jump to a shopping list on mobile a device, move to a kioskdescribing complementary products, be paid for at a traditionalcheckout lane, and finally end up on Facebook or Pinterest as theconsumer seeks input from product experts, friends and family, ortotal strangers. The retailer’s brand must be visible and interactiveat all of these touch-points, enabling seamless channel-hoppingacross devices.Today, the consumer controls and shapes their individualshopping experience across channels. In-store shopping setsthe bar for personal service and direct product experience.E-commerce raises expectations for competitive pricing,information availability, and expansive selection. Mobile—bymaking browsers and ‘apps’ portable—has made even the smallestslices of time into opportunities for brand interaction and,potentially, into “shoppable moments.”Despite recent high-profile rounds of store closures andconcerns about “showrooming,” consumers’ technology- andchannel-hopping is actually good news for stores.Today’s retailers face a constant battle for mind- and wallet-shareeven when consumers are in their store, on their website, usingtheir app Or just waiting for a train.Consider mobile, which allows consumers to shop anywhere.The top three shopping uses of a mobile phone are to find astore location, compare prices across stores, or check inventoryavailability in-store.33

Omni-Channel Vision, Cross-channel Reality: Meeting the Consumer Where They Want to BuyThe future is already here—retailersare building itAcross the purchase cycle, greater consumer use of technology toshop has been paralleled by the rising importance of the store.Globally, the store remains the number one source of productawareness and research—far ahead of digital sources such as searchengines, online streaming videos, specific retailer websites, ornon-digital sources such as friends and family.Science fiction author William Gibson told The Economist in 2003,“The future is already here; it’s just not evenly distributed.”Nowhere is this statement truer than in retail.Tesco already implemented the train station example cited abovein South Korea. Adidas, Ahold, Carrefour, and John Lewis havetested similar technologies. All share the same goal: reaching theconsumer on their terms, in a shoppable moment, with maximumconvenience and minimum cross-channel brand confusion.Stores naturally dominate purchase completion. In spite of theircontinued growth, non-store channels only account for less than5 percent of all retail spend globally.4 Categories such as grocery,pharmacy, and apparel—where a combination of quality, personalselection, urgency, and desire drive most purchases—remainremarkably resistant to outright disintermediation by onlinechannels.5Walmart experiments actively with brand experience acrosschannels. Smaller stores aimed at driving Walmart.com trafficappeared in southern California malls during the 2011 - 12 holidayseason. Stores nationwide became points-of-payment for cashe-commerce orders during the spring of 2012—attracting manyconsumers who had never shopped Walmart in any channel.To drive in-store sales of zero-inventory third-party products,Walmart transformed points-of-sale in select electronicsdepartments into ordering stations for Ticketmaster.Store-intensity also persists across research channels. Shopperswho conclude their purchases in-store include: 81 percent of those who research in-store, via traditionalmedia, or via friend-and-family Sixty-eight percent of those who research via retailer websites Sixty-one percent of those who research via search engines Fifty-six percent of those who research via social media Forty-seven percent of those who research via mobile appsIn-store mobile also reflects the convergence of channels.Starbucks’ in-store payment application handlesover 275,000 transactions per day.9 Numerous retailers,including Ahold, Carrefour, Rewe, and Tesco, offer in-storescanning on consumer mobile devices while Apple hasexperimented with mobile pre-ordering and has deployedin-store self-checkout via iTunes for certain purchases.Non-store channels do remain important, often in relationto the store. While web retail sales remain in the single digits,web-influenced sales transacted in stores account for roughlyhalf of all retail sales.6 Stores also “leak” shoppers to otherchannels. 2012 research shows that 17 percent of those whoresearch in store conclude their purchase in a non-store channel(9 percent retailer website, 4 percent online shopping portal orauction, and 4 percent mobile.7) More recent joint IBM andToshiba research shows non-store commerce most prevalent inthe consumer electronics and luxury segments, while apparel,health and beauty, and grocery remain very store-intensive.At the same time, across geographies and segments (excludinggrocery), interest in non-store channels is growing, with 9% ofconsumers saying they will shop online for their next purchase and35% undecided.8Architecting for the unknownWith no limits to cross-channel innovation in sight, several trendsseem likely to continue: Consumers demanding a seamless, personalized experienceindependent of venue Proliferation of venues for brand interaction and commerce,both inside the store (smart-screens, payment terminals)and outside the store (Pinterest, television, smarthome/shelf/closet) Retailers seeking technologies which make keeping pace withthese demands easier, cheaper, and faster4